Investing $1000 a month

[iqqi]

So I'll be saving $500 to $1000 a month, but I think it would be more productive to funnel it into some kind of investment so it can actually grow moreso than just adding loot without it doing anything.

Loosely saying any of that, does anyone here have any kind of advice or ideas into what I should do exactly? Should I just go with a financial advisor, and call it a day?

Thanks, experts and experienced alike. :yes:

 

[speed dawg]

Growth stock mutual funds. If you have no clue what that is, go with a financial advisor. There are some internet savings accounts out there that can yield enough to beat inflation if you want the money more liquid.

But that's a lot of money to save. Congrats on having the discipline to do that.

 

[Amazing]

Breast implants, tummy tuck, botox, but NOT lip injection.

Best investment you can make

 

[wait_out]

I'm interested in this too. Most guys I know are investing in their house -- but if you're not tied to a particular physical location, it doesn't make a lot of sense.

I don't have time for this one iqqi but you might want to try and seek out some kind of impartial online resource. Unfortunately anyone handing your money has to be viewed as suspect until proven otherwise -- taking advice from an advisor might be like taking advice from a real estate agent about buying his properties.

 

[Amazing]

Unless you are going to be buying and selling stocks yourself and checking them every day, just put it into a fund.

 

[Julius_Seizeher]

Advisorman to the rescue!

There are many things to consider. What is your debt like? I'm from the Ben Franklin school regarding debt, so my first choice for extra cash is to always get rid of that effing debt.

If your debt is low or currently under otherwise effective management, I look at the investment route. First, how old are you? What is your timeline to retirement? I assume you are not 50 years old in what we call the "retirement red zone", but for the vast majority of people with money in the marketplace, their money is inside a qualified (or non-qual) retirement plan. FYI, qualified=fully qualified for all taxes on contributions and capital gains upon distribution. Non-qualified=pay the tax now, only get hit on capital gains in the future (ie:Roth). So let's say you are in a 401K (Qualified) plan at work, and you want to put some of this money aside to help supplement your retirement when you roll it all into an annuity someday. Long story short, here's my first piece of advice:

1. Go see a financial advisor and tell him you want to open a Roth IRA. The maximum annual contribution for an IRA is $5000, so for the first months of the year you could dump 5 Gs into your Roth. Go for aggressive index funds or ETFs in the plan, they buffer against market downturn and have very low annual expenses vs. traditional mutual funds.

So there's that. Now, let's think about your risk. I'll assume you have health insurance through work. Depending on your occupation, disability insurance may be another crucial piece in your puzzle. Think about it; when a financial advisor crushes his hand in a car door and sustains nerve damage, he wraps it up and uses the other hand to dial the phone. When a surgeon has the same accident, GAME OVER. IMO, the importance of DI is directly related to your occupation, so I will remain neutral in recommending it. If you have a group DI policy through work, beware, group DI is notorious for being junk insurance and legions of attorneys make excellent livings suing those companies. If you have a spouse or kids, you may think about life insurance, but if you're like me and you don't have any of that sh!t, FVCK IT!

*consider carrying enough LI to cover final expenses, it's a dirt cheap way to keep your family from cussing you if you die without it

So with our risk and retirement bases covered, let's get on to investing. Flashback...the last 2-3 years have been a haven for bond investors. Not so much anymore, the equity markets are growing and interest rates are about to go up. But really, investing in bonds is a practice for serious investors with a high net-worth. So don't buy anything debt-related, bonds are about to go down and Treasuries are already in the sh!tter. Growth stock mutual funds are probably the way to go for you, look at Fidelity's Transportation Fund, it is kicking ass now.

But if you wanted to keep this money liquid, shop around your local banks for the best municipal money market account. The gains are federal tax-free, and the principal is 100% liquid with no strings attached. These MMM accounts are tailor-made for a cash nestegg, a rainy day account, saving to buy a house, etc.

Somethings to think about.

 

[Julius_Seizeher]

Advisorman to the rescue!

There are many things to consider. What is your debt like? I'm from the Ben Franklin school regarding debt, so my first choice for extra cash is to always get rid of that effing debt.

If your debt is low or currently under otherwise effective management, I look at the investment route. First, how old are you? What is your timeline to retirement? I assume you are not 50 years old in what we call the "retirement red zone", but for the vast majority of people with money in the marketplace, their money is inside a qualified (or non-qual) retirement plan. FYI, qualified=fully qualified for all taxes on contributions and capital gains upon distribution. Non-qualified=pay the tax now, only get hit on capital gains in the future (ie:Roth). So let's say you are in a 401K (Qualified) plan at work, and you want to put some of this money aside to help supplement your retirement when you roll it all into an annuity someday. Long story short, here's my first piece of advice:

1. Go see a financial advisor and tell him you want to open a Roth IRA. The maximum annual contribution for an IRA is $5000, so for the first months of the year you could dump 5 Gs into your Roth. Go for aggressive index funds or ETFs in the plan, they buffer against market downturn and have very low annual expenses vs. traditional mutual funds.

So there's that. Now, let's think about your risk. I'll assume you have health insurance through work. Depending on your occupation, disability insurance may be another crucial piece in your puzzle. Think about it; when a financial advisor crushes his hand in a car door and sustains nerve damage, he wraps it up and uses the other hand to dial the phone. When a surgeon has the same accident, GAME OVER. IMO, the importance of DI is directly related to your occupation, so I will remain neutral in recommending it. If you have a group DI policy through work, beware, group DI is notorious for being junk insurance and legions of attorneys make excellent livings suing those companies. If you have a spouse or kids, you may think about life insurance, but if you're like me and you don't have any of that sh!t, FVCK IT!

*consider carrying enough LI to cover final expenses, it's a dirt cheap way to keep your family from cussing you if you die without it

So with our risk and retirement bases covered, let's get on to investing. Flashback...the last 2-3 years have been a haven for bond investors. Not so much anymore, the equity markets are growing and interest rates are about to go up. But really, investing in bonds is a practice for serious investors with a high net-worth. So don't buy anything debt-related, bonds are about to go down and Treasuries are already in the sh!tter. Growth stock mutual funds are probably the way to go for you, look at Fidelity's Transportation Fund, it is kicking ass now.

But if you wanted to keep this money liquid, shop around your local banks for the best municipal money market account. The gains are federal tax-free, and the principal is 100% liquid with no strings attached. These MMM accounts are tailor-made for a cash nestegg, a rainy day account, saving to buy a house, etc.

Somethings to think about.

 

[Alle_Gory]

I'm interested in this too. Most guys I know are investing in their house.

It's only investing if you plan to sell the house. Otherwise you never see the extra value. Sure it might look pretty...

Then you have to take into account moving costs, paying the real estate fees, moving costs for a new house, an apartment in the meantime maybe... etc. All this costs money. In the end after you sell the house and you take away all these extra expenses, the rate of return isn't really that good. That and real estate isn't really that good right now.

Best thing to do with extra cash is to pay down debts, since they suck down money and grow. Then you can focus on investing after being (long term) debt free.

 

[SmoothTalker]

If you don't know what you are doing, don't go with growth mutual funds.

First, despite the name, in the long run growth funds actually tend to underperform.

Also, screw managed mutual funds entirely, the fees suck up any extra gains the manager gets you, and then some.

Buy index funds.

 

[iqqi]

Thanks for the advice so far. I've heard two people mention index funds so I will look into that.

Can you also give some numerical examples into what my money could be doing? So far it's all just a bunch of terms and hard to envision what benefit I could be looking at. I plan on socking away $1000 a month, $500 on months where **** comes up and eats away at my income. Or I decide I need a nice $500 vacation here and there. Last month was a $1000 month, this month may fall short. And thanks for the acknowledgement, Speeddawg! I am pretty good at doing something once I put my mind to it.

And I am not interested in paying down debt, I have a few IOU's to places that are marring my credit score but nothing that is growing in interest so I'll pay once I have my gold stockpiled. I don't plan on buying a house or anything like that just yet.

 

[Julius_Seizeher]

Also, screw managed mutual funds entirely, the fees suck up any extra gains the manager gets you, and then some.

I tell my clients exactly why I take 1.5% on all wrap accounts: I'm worth it. Only minnows whine about commission, and it's the main reason that 90% of all FAs are chasing the same people. Attorneys, Doctors, Entrepreneurs, they are professionals and they understand what they're paying for.

EDIT: Think of it this way: In the old days (pre-managed money), advisor's were only paid on a transactional basis. The problem was, in order to make any kind of living, they had to churn the hell out of their clients' accounts. That's why the old-school FA would call a guy every three months and say "Hey, now this is getting hot! We need to put your money over here!" Regulations and the RIA model have evolved to outlaw churning and create a means for advisors to be able to make a white man's wage. Obviously there is still transactional business, mostly on insurance products and annuities, but the RIA model blew all the bullsh!t out of the way and makes for a simple, transparent, and competitive compensation schedule for FAs. So what you have today is a bloodthirsty force of advisors all making .5-2% on their Total Assets Under Management, and a brutal war to be King of the Mountain. The more things change, the more they stay the same.

But I agree, mutual funds are not the best choice for a managed money platform. By nature of their design, mutual funds are perfect for long-term asset allocation (ie: retirement accounts) with varying degrees of highly-managed risk. ETFs are the best equities for managed money, IMO.

 

[mpimpin]

First make sure you have cash on hand for debt payments, or unexpected events. Talk to your bank about a money market account.

Second if you have that covered consider a Roth IRA to save for retirement. You can look at vanguard.com for more info and I think they have a calculator for you to play around with and see what your money will look like.

If you aren't confident and/or do not feel you have sufficient financial knowledge talk to an adviser.

 

[wait_out]

My friend was talking about ETF's as well and he's pretty much a genius.

I've been procrastinating on doing that a long time. I have $1000 a month that goes direct to term deposits, about 30k+ liquid and no debts or obligations. Don't know what the hell to do with it though... being middle class doesn't feel like a big step up from hipster kids living on food stamps.

It's certainly not enough capital to launch anything ambitious (pole dancing school?).

 

[taiyuu_otoko]

It all depends on how much time and energy you want spend watching it every month. If you want to set it and forget it, go with an index fund.

You can do good with managed funds, but there aren't that many that outperform the market, like only ten percent or so, and the ones that do don't always outperform the market, so you'd have to either spend time reallocating every couple months, or get a fund manager that knows what he's doing. And by knows what he's doing, has consistently outperformed the market for five or ten years.

If you're not willing to pay extra for that caliber of fund manager, or do the research on your own (not really that difficult, see "how to make money in stocks, by O'Neil) just stick it in an index fund and call it a day.

Up to you.

 

[SmoothTalker]

Julius_Seizeher, good for you.

But I'm talking about facts backed by multiple large studies that consistently show that on average, in the long run, actively managed money underperforms.

Of course there are exceptions (Buffet, Rogers, Soros come to mind among others) but it's hard to pick the skilled manager because past performance often means **** all, and maybe you really are good, but all the bad ones will tell their clients they're worth it also.

PS: If you're that good why not start up your own hedge fund and retire after a year or two?

Edit: Iqqi, seriously take a look at paying off your debt first. Unless it's some sort of amazingly low interest arrangement (e.g. a 0 percent car loan that you've already signed.. in which case of course they got their interest money out of you some other way, but now that it's done that's sunk cost), odds are no reasonably safe investments will earn you anywhere near what you're paying in interest on those debts. In business it makes sense to carry debt sometimes, and interest is a tax deduction. In your personal life, it's a terrible, money wasting thing.

Also, over the last few years the stock market has been a freak show, both on the way down and now on the way back. Don't expect the 50% returns we saw over the past year going forward.

 

[Create Reality]

Remember, when you buy stock, you buy ownership in a company. Common stock guarantees you a say in the directors of a company (usually), and preferred stock is usually asset backed.

When you buy bonds, you buy the debt of a company. This is a return of cash based on real numbers, not hocus pocus and hungry hippos.

 

[Amazing]

Remember, when you buy stock, you buy ownership in a company. Common stock guarantees you a say in the directors of a company (usually), and preferred stock is usually asset backed.

When you buy bonds, you buy the debt of a company. This is a return of cash based on real numbers, not hocus pocus and hungry hippos.

LOL. I own quite a bit of stocks, and everytime I call the IR they dont treat me special!

Buy stocks dont marry em

 

[Trader]

If you don't know what you are doing, don't go with growth mutual funds.

First, despite the name, in the long run growth funds actually tend to underperform.

Also, screw managed mutual funds entirely, the fees suck up any extra gains the manager gets you, and then some.

Buy index funds.

My friend was talking about ETF's as well and he's pretty much a genius.

I am in the field of finance and you are correct.

Managed mutual funds are the biggest joke ever. ETFs will always give you a higher return over the long run because, like you said, mutual fund fees are a huge drag.

There are investment funds that consistently make outsized gains over the long term. Newsflash, those hedge funds are CLOSED to outside investors like you and me (i.e. SAC Capital, Renaissance, Quantum Fund), unless you have a high net worth, OR you have an 'in' with one of the fund managers.

The funds that advertise heavily in say Kiplingers are usually a joke, they are just trying to milk their outperformance of the market that year. They will revert back to below the mean.

 

[Julius_Seizeher]

The thing about hedge funds is, even if you were an accredited investor, you wouldn't want anything to do with them. Hedge funds are the wild west of the investment world, they are subject to ZERO SEC regulation and they invest in anything. I heard recently of a hedge that was giving odds on the judgments of lawsuits Vegas-style, wth kind of investing is that? The only difference between a hedge fund manager and the sleazeball at the horsetrack is a $2000 suit. They are crooked as fvck.

So OP, here's what you should consider for your money:

1. Pay down debt.

2. Establish a decent cash savings in a municipal money market account. If your bank doesn't have one, shop around.

3. Invest in your retirement. Keep it simple, open a Roth IRA and select a portfolio that mirrors your desired level of risk.

 

[ENIGMA16]

1. Pay down debt.

2. Establish a decent cash savings in a municipal money market account. If your bank doesn't have one, shop around.

3. Invest in your retirement. Keep it simple, open a Roth IRA and select a portfolio that mirrors your desired level of risk.

DEFINITELY this, although I wouldn't open the Roth just yet (assuming you're my age), simply because you can earn more money investing your money elsewhere, even after taxes.

I'd recommend that you first pay down all of your debt. This is the simplest way of doing things; it's more profitable to compare the interest on your debt to the interest on potential investments and channel your money accordingly, but that's more complicated than I'd recommend for most people.

I would then open up an account with Vanguard and invest all of your money in their mutual funds. The investment risk should be based on your age (for example, I'm planning on channeling all of my money into their riskiest funds because I'm only 22).

You can get more into it than that but this will be a good foundation on which to expand. I also recommend reading some of John Bogle's books.